September 12, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Private investment management services firm Domain Capital Group announced that its subsidiary Domain Timber Advisors has recently closed on $225 million in capital commitments across Domain’s value-added timberland investment strategy from sovereign wealth funds, public and private pensions, insurance companies, and family-owned wealth management interests from the United States, Europe, and Australasia.

These commitments included $150 million allocated to a separately managed account, and $75 million allocated to the Domain Timber Opportunity Fund (DTOF), which held its first close this June.  

Based in Atlanta, Georgia, Domain Capital Group manages $8.2 billion in total AUM (as of March 31, 2023) spread across its two registered subsidiaries: Domain Capital Advisors and Domain Timber Advisors. These assets are comprised of approximately $7.2 billion in real estate, debt, alternative, and other assets constituting Regulatory Assets Under Management (RAUM) and approximately $1 billion in non-RAUM assets including real properties and additional loans services. 

Timberland is rapidly gaining credibility as a prime alternative investment for gaining environmental, social, and governance (ESG) benefits for portfolios. As such, demand for these kinds of sustainable alternatives continues to strengthen among the pension and institutional investor space as part of their broader commitments to climate change mitigation and sustainability.

Domain explained that its value-added timberland strategy sources non-industrial, degraded, or under-utilized timberland and has a long, successful track record of managing such assets and achieving both economic and environmental positive outcomes through property improvements and the ultimate aggregation of the acquisitions. 

“We are pleased to have exceeded the fundraising target for our value-added investment strategy,” said Patrick Neuman, director of business development, Domain Capital Group. “The commitments are especially gratifying because they represent new investor relationships. We are humbled by their trust, look forward to meeting their expectations and advancing a long and mutually beneficial partnership.”

Just this year, Domain executed a major transaction in February when it announced the acquisition of 22,000 acres of timberland throughout the U.S. Southeast via six separate deals spanning October 2022 – January 2023.

One month later, in March, Domain Timber Advisors assumed investment responsibilities for a timberland portfolio containing assets located in the U.S. Southeast and Northwest regions. 

This transfer marked the ninth separately managed account to be assumed by Domain Timber since 2017, and brought total acres of timberland under management to nearly 250,000 acres (not including environmental fund assets).

This was followed by the successful completion of the sale of nearly 2,900 acres of timberland in southeast Arkansas via an unsolicited, off-market deal in August of this year. 

Originally acquired by Domain earlier this year, these sold tracts were located in Hot Spring, Grant, Jefferson, and Pulaski counties and were targeted as they met the company’s core investment criteria – a focus on smaller, non-contiguous parcels that generally run from 2,000-30,000 acres with the potential for significant biological growth and income generation. 

“While we felt the Arkansas footprint was high-quality timberland, with strong long-term growth potential, we were presented with an unsolicited offer in-line with our strategy and that was accretive to our underwriting,” said Peter Walker, vice president of investments and timberland assets, Domain Timber Advisors, at the time. 

“We believe the sale of the Arkansas assets is a clear example of the firm’s strategy to achieve returns above traditional core timberland through the implementation of opportunistic land sales and other value-add initiatives.”

The uptick in global forestry investment reflects a broader shift in investment priorities toward patient capital, sustainability, responsible stewardship of natural resources, and value creation in the long-term. 

This shift is being largely driven by a confluence of factors that have made forests and timberland an increasingly attractive asset class for investors. These include:

~ A growing demand for timber: As the global population grows, so does the demand for wood for the construction, furniture manufacturing, and paper products industries.

~ The benefits of diversification: Thanks to its low correlation with mainstream asset classes and markets, the inclusion of forestry in a portfolio is a beneficial way to mitigate risk.

~ Government support: As sustainability and ESG continue to be key concerns, governments are increasingly offering subsidies, tax benefits, and other incentives for investment in the forestry sector. 

~ Carbon offset opportunities: The potential for forestry assets to present the opportunity to earn, and possibly sell, carbon credits is vast. Giving investors access to real assets offering multiple income streams while hedging against inflation. 

~ A long-term investment horizon: Due to their life cycles, forests are naturally a long-term commitment for investors – a scenario that often aligns with institutional investors. 

For Domain Timber’s separately managed accounts, the manager explained that it offers clients a great deal of flexibility and control of asset portfolios, allowing investors to maximize diversification or to potentially reduce risk exposure. Within this framework, clients can establish separate account mandates based on asset size, geography, and yield versus net return requirements, among other factors. 

“Investors appreciate our lower middle market approach and the years spent on the development of the strategy,” noted Neuman. “It is exciting to see the team’s hard work and efforts pay off.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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